Correlation Between Meta Platforms and Spire

Can any of the company-specific risk be diversified away by investing in both Meta Platforms and Spire at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Meta Platforms and Spire into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Meta Platforms and Spire Inc, you can compare the effects of market volatilities on Meta Platforms and Spire and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Meta Platforms with a short position of Spire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Spire.

Diversification Opportunities for Meta Platforms and Spire

0.07

Correlation Coefficient

Meta Platforms  Spire

Significant diversification

The 3 months correlation between Meta and Spire is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms and Spire Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Inc and Meta Platforms is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Meta Platforms are associated (or correlated) with Spire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Inc has no effect on the direction of Meta Platforms i.e., Meta Platforms and Spire go up and down completely randomly.

Pair Corralation between Meta Platforms and Spire

If you would invest  5,743  in Spire Inc on January 26, 2024 and sell it today you would earn a total of  462.00  from holding Spire Inc or generate 8.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.61%
Values	Daily Returns

Meta Platforms  vs.  Spire Inc

Meta Platforms

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Meta Platforms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Meta Platforms is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Spire Inc

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Spire may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Meta Platforms and Spire

The main advantage of trading using opposite Meta Platforms and Spire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms position performs unexpectedly, Spire can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Spire will offset losses from the drop in Spire's long position.

The idea behind Meta Platforms and Spire Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.